About Me

Saturday, February 02, 2013

In
November 30, 2012, this column made a ratherbold statementabout the economy for the fourth
quarter of that year.

The
National Statistical Coordination Board (NSCB) yesterday announced that
fourth-quarter growth came in at 6.8 percent, or just 0.2 percent shy of the
forecast.

It
was not an “ambitious” figure to target for the fourth quarter. For one, the
growth momentum for the first three quarters of the year was already there: 6.3
percent in the first quarter, 6 percent in the second, and 7.1 percent in the
third (later revised upwards to 7.2 percent). Second, the growth momentum in
Asia’s emerging economies is still there. For instance, growth rates in the
third-quarter were 7.7 percent in China, 6.2 percent in Indonesia, 5.3 percent
in India, 5.2 percent in Malaysia, 4.7 percent in Vietnam and 3.3 percent in
Thailand.

This
is one advantage of being a neighbor to faster growing economies. Even if
political and economic governance in the home country is not that good, overall
economic activity will be pulled up by the more dynamic neighbors through
regional trade, investments and tourism. In the case of the Philippines and its
neighbors in North and Southeast Asia, they seem to be pulling each other up.

The
phenomenal economic expansion of the planet’s two most populous countries --
China and India, with a combined 2.5 billion population -- is a good example of
how they have helped expand demand for goods and services exported by their
neighbors in the region. Below are two tables showing the phenomenal economic
expansion of many Asian emerging economies in just two decades. Purchasing
power parity (PPP) valuation of gross domestic product (GDP) is used instead of
the usual nominal GDP to correct for hyper valuation of goods and services in
many rich countries.

In
just two decades, China’s economy has expanded 10.3 times from its 1992 level,
while India has expanded 5.6 times over the same period. In contrast, the rich
European and US economies have expanded only between 2-2.5 times.

The
table below shows the expansion of a bigger set of Asian emerging economies:

There
are several important implications of the above numbers.

One,
many Asian economies increasingly are becoming the “growth anchor” for the rest
of the world economy. Expanding wealth and consumer purchasing capacity in Asia
creates additional demand for other economies' goods and services exports that
may balance between anemic growth and stagnation, if not contraction.

Two,
big population is generally an asset as the economy has more consumers, more
workers and more entrepreneurs. This is clear in the cases of Japan Indonesia,
India and China, countries with populations of 127 million, almost 250 million,
1.2 billion and 1.3 billion, respectively. Among the reasons often cited by
investors who put their money here is that the Philippines has a big and young
population that can easily be trained with new and changing skills.

Three,
intra-Asian merchandise trade and people mobility greatly help integrate their
economies and in the process, pull each other up economically.

So
in the absence of really globally or regionally disruptive events like war or
huge fiscal collapse of the major European economies, the “default mode” is
continued expansion of many Asian emerging economies like the Philippines.

More
business-friendly government policies and bureaucracies will help the country
sustain and even surpass current economic performance.